FFL question for FFL holders

FFL question for FFL holders

This is a discussion on FFL question for FFL holders within the FFL Dealer Discussion forums, part of the Related Topics category; I know I've been posting on here a bit about home-based FFL's, the Mrs. is finally fed up with her job and says that she ...

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Thread: FFL question for FFL holders

  1. #1
    Member Array Linny's Avatar
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    FFL question for FFL holders

    I know I've been posting on here a bit about home-based FFL's, the Mrs. is finally fed up with her job and says that she would entertain the idea to work from home running an online and based FFL business. I have been told from a friend that has a type 07 that the best way to do this is first file for an LLC and then apply for the type 01 with the LLC. I have already checked zoning regulations in my area, and my lot is zoned multi-use meaning I can have a home based business as well as I did not see any prohibition on having an FFL. The only thing I can't do in my area is have a strip club within a thousand feet of a kindergarden according to the city code. Do I have to file for an LLC first or can I apply for the FFL and then if I get approved create the LLC? I want to risk the least amount of cash as possible. That was question number 1.

    Number 2 is a question about switching from a type 01 to a type 06/07. Do type 06's have to pay the ITAR tax like the 07's? The goal is to make enough money in the type 01 to switch to a type 06 and then a type 07. Thanks.
    -Linny
    USMC 2009-2013 0341 Pfc-Cpl.
    OEF II 2 Pumps
    Escaped Californian
    My Blog http://renogunblog.blogspot.com/


  2. #2
    VIP Member Array OutWestSystems's Avatar
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    If you are going to run a home based FFL, have a room set aside for the business. That room is used ONLY for the business. Best to have that room, rented from you as the home owner to the business you. I would set up at least an LLC. A separate outdoor entrance to that room would be best.

    Yes the LLC should be in place before apply for the FFL because you will be filing for the FLL as the LLC.

  3. #3
    Member Array Linny's Avatar
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    Thank you.
    USMC 2009-2013 0341 Pfc-Cpl.
    OEF II 2 Pumps
    Escaped Californian
    My Blog http://renogunblog.blogspot.com/

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    VIP Member Array Tubby45's Avatar
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    Quote Originally Posted by Linny View Post
    Do I have to file for an LLC first or can I apply for the FFL and then if I get approved create the LLC? I want to risk the least amount of cash as possible. That was question number 1.
    Yes. You want the FFL to be held in the LLC's name. LLC first, then the LLC applies for the FFL and you are named a responsible person.

    To answer future question that come up a lot: If you buy a gun using the LLC's FFL, you and the FFL are not the same. You must file a 4473 and do a background check on yourself as though you are a retail customer. This is because the LLC is the FFL, not you personally.

    Number 2 is a question about switching from a type 01 to a type 06/07. Do type 06's have to pay the ITAR tax like the 07's? The goal is to make enough money in the type 01 to switch to a type 06 and then a type 07. Thanks.
    -Linny
    Yes, type 06, 07, and 10 FFL have to register with ITAR (not a tax it's a registration fee) if they are manufacturing. Holding a manufacturing FFL does not mean you have to register, only if you are ACTUALLY manufacturing. Also, the ATF cannot comment on ITAR because that is a State Department regulation.

    Your plan of starting with an 01, then adding an 06, then adding an 07 is a waste of your time, money, and the ATF's time. I advise you to just get the 07 FFL right from the start. With an 07, you can do everything that an 01 and an 06 can do. So if zoning allows, get the 07 and just do dealer and gunsmithing stuff until you save up enough cash to register for ITAR, then start the manufacturing operations.
    07/02 FFL/SOT since 2006

  5. #5
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    Quote Originally Posted by Linny View Post
    I know I've been posting on here a bit about home-based FFL's, the Mrs. is finally fed up with her job and says that she would entertain the idea to work from home running an online and based FFL business. I have been told from a friend that has a type 07 that the best way to do this is first file for an LLC and then apply for the type 01 with the LLC. I have already checked zoning regulations in my area, and my lot is zoned multi-use meaning I can have a home based business as well as I did not see any prohibition on having an FFL. The only thing I can't do in my area is have a strip club within a thousand feet of a kindergarden according to the city code. Do I have to file for an LLC first or can I apply for the FFL and then if I get approved create the LLC? I want to risk the least amount of cash as possible. That was question number 1.

    Number 2 is a question about switching from a type 01 to a type 06/07. Do type 06's have to pay the ITAR tax like the 07's? The goal is to make enough money in the type 01 to switch to a type 06 and then a type 07. Thanks.
    -Linny
    The ratio of 01 FFL's to 07 FFL's is about 6.5 to 1 in favor of 01. Each licensee operates a business. The difference is the focus of the business. Each type of license allows the holder to deal firearms to the public while the 07 license also allows for the manufacture of firearms. I'm an 01. I retail firearms, ammo and accessories over the counter and also "E-tail."

    I don't do much gunsmith work and don't build custom firearms so I have no real need for an 07. If you intend to sell firearms via the internet, I think you will soon find that trying to sell custom built AR's is not very practical. Selling parts, receivers and accessories on the other hand is.

    There are probably still more sole proprietor licensee's then either partnerships or LLC's. Any type of business structure is acceptable to BATFE and to your Secretary of State who will issue your Retail Sales License. LLC's are popular, easy to form and do have a few advantages that other structures do not. Partnerships require at least two partners. LLC's require at least two Members. LLC's are taxed the same as partnerships. LLC's afford "a degree of Limited Liability but an LLC does not necessarily mean that personal assets cannot be taken in the event of a law suit. One advantage however is that filing for a fictitious name change or addition (aka, DBA) is very simple in most states. For example you might form your LLC under the name Linny's Guns, LLC while you are Doing Business As (your internet domain name) such as: Guns.com. Most states will require you register any additional name including internet domain names.

    Get your check book out because startup costs are expensive. As a home based business, you will find that some large distributors will not sell to you. Inventory is expensive. If you are not a stocking dealer, shipping expenses for small orders will eat into already slim margins. Gun shops are retail businesses weather home based or not. Some small retailers do make it but not without adequate capitol and very long hours.

    I wish you luck and success if you choose to become an FFL.
    If you understand, things are just as they are... If you do not understand, things are just as they are....
    - Zen Saying

  6. #6
    New Member Array dogleg's Avatar
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    I've been a home based FFL and online retailer since 2011. Shoot me an email you need to talk about getting starting.

  7. #7
    New Member Array blmaddox's Avatar
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    Hey Linny!

    Yes, the local IOI from ATF will check your state's SOS website to ensure the LLC is active before they will proceed.

    Agree with others that an 06 is not needed when you have an 07. If you call the department of state, they say you need ITAR with an 06/07 even if you never manufacture.

    I requested a formal exception and it was granted, so best to get it in writing.

    Thanks,
    Brandon L. Maddox (Class 3 dealer in SD, ND, NE, & WY) Owner of Dakota Silencer and FFL123.com

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